Canadian oil patch for sale!

[Guest 50centdollars]

So when is the oil sands going bankrupt?

[kevin4u2]

Wow, some serious carnage on bay street.  Looks like breaking the $70 oil handle was the last straw for some people. 

 

Time to buy or more carnage to come?  Wait for the first bankruptcy, and watch the fear spike? 

 

I am getting trigger happy. 

 

So when is the oil sands going bankrupt?

[dutchman]

Kevin4u2, I always appreciate your thoughts.

 

Can I ask which Canadian Energy names you'd really like to own on a further pullback ?  thank you.

[doc75]

Wow, some serious carnage on bay street.  Looks like breaking the $70 oil handle was the last straw for some people. 

 

Time to buy or more carnage to come?  Wait for the first bankruptcy, and watch the fear spike? 

 

I am getting trigger happy. 

 

So when is the oil sands going bankrupt?

 

What I can't figure out is why crude has dropped 5-6% on widely expected "news".  Seems to me that the lack of OPEC response was a given -- Saudia Arabia made this pretty clear.  And most analysts question the impact that OPEC could have even if they did cut back production.

 

I could understand a small dip, but this much price movement really surprises me.

 

Also interesting is that LTS is down 15%, but not even close to its low from a couple weeks ago.

[tengen]

I could understand a small dip, but this much price movement really surprises me.

 

I am mystified as well. However, when I read stories about traders having a competition to be the first to buy oil at $100, I wonder about market manipulation:

 

http://www.businessinsider.com/gerry-altilio-meet-the-man-who-single-handedly-shot-oil-to-record-prices-and-bought-the-first-100-barrel-2010-8

 

I also recall stories that blamed high oil prices on hedge funds. Maybe we can blame them for the drop as well...  :-\

[yadayada]

You always see that in markets. Just like the stockmarket. There is some news coming out that is basicly old news, and stock still pops or drops. Even though odds of it happening was close to 100% based on public information. 

[siddharth18]

 

What I can't figure out is why crude has dropped 5-6% on widely expected "news".  Seems to me that the lack of OPEC response was a given -- Saudia Arabia made this pretty clear.  And most analysts question the impact that OPEC could have even if they did cut back production.

 

I could understand a small dip, but this much price movement really surprises me.

 

 

Because there were those in the market (analysts, traders, speculators, etc) that did expect OPEC to announce cuts in output. Remember the analysts were split before the meeting and it's likely that some market participants believed (and hence acted) as if there was a cut coming. And because it didn't, it was time to close their bets (ie - sell their long position) as the outcome contravened their thesis.

 

"A Bloomberg News survey showed 20 analysts were evenly divided on whether the Organization of Petroleum Exporting Countries will cut supply." Source: http://www.bloomberg.com/news/2014-11-25/wti-extends-drop-from-4-year-low-as-pre-opec-talks-fail-on-cuts.html

[doc75]

 

What I can't figure out is why crude has dropped 5-6% on widely expected "news".  Seems to me that the lack of OPEC response was a given -- Saudia Arabia made this pretty clear.  And most analysts question the impact that OPEC could have even if they did cut back production.

 

I could understand a small dip, but this much price movement really surprises me.

 

 

Because there were those in the market (analysts, traders, speculators, etc) that did expect OPEC to announce cuts in output. Remember the analysts were split before the meeting and it's likely that some market participants believed (and hence acted) as if there was a cut coming. And because it didn't, it was time to close their bets (ie - sell their long position) as the outcome contravened their thesis.

 

"A Bloomberg News survey showed 20 analysts were evenly divided on whether the Organization of Petroleum Exporting Countries will cut supply." Source: http://www.bloomberg.com/news/2014-11-25/wti-extends-drop-from-4-year-low-as-pre-opec-talks-fail-on-cuts.html

 

Thanks.  I was under the impression that the vast majority of analysts were expecting no action (or, at least, expecting a cut to have no impact).  Don't know how I missed that it was evenly divided sentiment.

[plato1976]

It's interesting to review old posts.

Well, the reality is, we are not looking into $70 oil, we are looking into $60 in fact

 

PWT's 5 year plan uses $90 oil.

And i think 1.03  exchange rate. So 85 wti will still look good for them at current exchange rate.

 

But asset sale will be difficult.

 

For 2014, budget for 92.5

 

 

So things are ok.

 

But if one thinks wti is heading to 70, no reason to be in this sector.

[alertmeipp]

It's interesting to review old posts.

Well, the reality is, we are not looking into $70 oil, we are looking into $60 in fact

 

PWT's 5 year plan uses $90 oil.

And i think 1.03  exchange rate. So 85 wti will still look good for them at current exchange rate.

 

But asset sale will be difficult.

 

For 2014, budget for 92.5

 

 

So things are ok.

 

But if one thinks wti is heading to 70, no reason to be in this sector.

 

Stock price was 50 percent higher than today.

 

If I were to believe oil will be 70, I would have sold and short many of the real higher cost ones..

 

I thought it will stabilize in the 80s.

 

It was wrong and paid dearly. 

 

[plato1976]

I feel the real opportunity is coming

but the key is to pick a really low cost one (absolutely needs to be lower cost than most US shale producers) without big leverage

, so it can hang on long enough

 

is LEG a candidate?

 

It's interesting to review old posts.

Well, the reality is, we are not looking into $70 oil, we are looking into $60 in fact

 

PWT's 5 year plan uses $90 oil.

And i think 1.03  exchange rate. So 85 wti will still look good for them at current exchange rate.

 

But asset sale will be difficult.

 

For 2014, budget for 92.5

 

 

So things are ok.

 

But if one thinks wti is heading to 70, no reason to be in this sector.

 

Stock price was 50 percent higher than today.

 

If I were to believe oil will be 70, I would have sold and short many of the real higher cost ones..

 

I thought it will stabilize in the 80s.

 

It was wrong and paid dearly.

[sys]

I feel the real opportunity is coming

but the key is to pick a really low cost one (absolutely needs to be lower cost than most US shale producers) without big leverage , so it can hang on long enough

 

is LEG a candidate?

 

they may be a low cost producer (and growing production, unlike some of the names frequently discussed), but they've got plenty of leverage.

[sys]

i guess my own thoughts for new money are to move up the quality ladder, rather than look for deeper discounts on the more marginal names.  more focused on debt than cost.

[alertmeipp]

Depends on how u look. You can make a case that Pennwest is not leveraged. They have assets to sell,  they have dividend to cut. Top notch gassy assets are still in demand and probably more so now.

 

 

 

[kevin4u2]

Murray Edwards from CNRL sees oil at $30US.

 

http://business.financialpost.com/2014/11/28/canadian-natural-resources-chairman-sees-oil-touching-us35-a-barrel/?__lsa=7b2d-df74

 

If Edwards is right, there is still a lot of time to wait.  Add in tax loss selling over the next month, asset write-downs in Q4, loan covenants being broken, bankers will be nervous... things will get volatile.    Most everyone will throw in the towel eventually.  What is amazing is how fast equity prices have fallen in a week.   

[doc75]

Murray Edwards from CNRL sees oil at $30US.

 

http://business.financialpost.com/2014/11/28/canadian-natural-resources-chairman-sees-oil-touching-us35-a-barrel/?__lsa=7b2d-df74

 

If Edwards is right, there is still a lot of time to wait.  Add in tax loss selling over the next month, asset write-downs in Q4, loan covenants being broken, bankers will be nervous... things will get volatile.    Most everyone will throw in the towel eventually.  What is amazing is how fast equity prices have fallen in a week. 

 

More accurately, Edwards sees oil plausibly spiking down to $30-35 and stabilizing at $70-75.

 

But no matter.  Even with a brief spike many O&G equities will get hammered compared to today's prices.

 

[alertmeipp]

u know what's funny... CNQ itself is using 80 bucks WTI assumption for 2015.

 

And their 2015 hedge is very light.

 

If he really believes what he said, wouldn't you expect a very different picture.

 

And the fact he used 2008 as an example tells you something, maybe he wanted some lawsuit.. LOL.

 

 

[Guest wellmont]

he said expect big volatility. but the good news is he expects prices to stabilize somewhat above the level we are at now. this is good if you are a trader. an investor will have to tolerate big fluctuations that could be mentally draining.

[alertmeipp]

he said expect big volatility. but the good news is he expects prices to stabilize somewhat above the level we are at now. this is good if you are a trader. an investor will have to tolerate big fluctuations that could be mentally draining.

 

Well, 

 

If he see big volatility,  shouldn't he put more hedge in. Oil can go anywhere. All I am pointing out is there is a disconnect in his comments and cnq strategy

[Uccmal]

Murray Edwards from CNRL sees oil at $30US.

 

http://business.financialpost.com/2014/11/28/canadian-natural-resources-chairman-sees-oil-touching-us35-a-barrel/?__lsa=7b2d-df74

 

If Edwards is right, there is still a lot of time to wait.  Add in tax loss selling over the next month, asset write-downs in Q4, loan covenants being broken, bankers will be nervous... things will get volatile.    Most everyone will throw in the towel eventually.  What is amazing is how fast equity prices have fallen in a week. 

 

More accurately, Edwards sees oil plausibly spiking down to $30-35 and stabilizing at $70-75.

 

But no matter.  Even with a brief spike many O&G equities will get hammered compared to today's prices.

 

And he has a crystal ball in his office.  As we have seen this year, yet again, fossil fuel prices are completely unpredictable.  I expect he would like to see it play out as he says, for CNQs benefit.

[Cardboard]

This whole debacle looks to me like hedge funds piling on each other while many exit the trade.

 

While there are real factors explaining the oil price decline such as: QE end, USD strength since June, European and Chinese economic weakness, new strong production from the U.S. and the desire from Saudi Arabia to take down U.S. shale, the speed and depth of the decline just does not seem to add up with data from inventories.

 

When one looks at forward pricing for WTI, they are clearly in the $80 range despite current spot at around $65. So any company can hedge forward its future production at $80 if need be. It is only current, unhedged production that is delivered at $65 or below depending on the region. Is your company capable to survive oil at $65 for a quarter or two?

 

The picture looks even better for Canada, considering that you need to add about 13% to these prices accounting for the exchange rate.

 

So IMO, the people who are gonna suffer the most are the ones who are panicking now and dumping cheap equities. And the ones who are facing margin calls on equities and oil futures being forced to get out. Things are now priced like 2008/2009 with oil at $30 and there is no visible economic crisis. At least yet. If there is a global depression then all bets are off, but many stocks are pricing that already.

 

Cardboard

[sculpin]

From Canaccord...

 

•        Sector rotation -- Tighten up subsector bets.

 

o  Overvalued groups keep getting pricier and undervalued groups cheaper.

  Relative valuation of resource cyclicals has fallen below the Great Recession lows (fall of 2008).

  It is also approaching the lows seen at the height of the technology bubble (spring 2000).

o  A mean-reversal in sector valuation is long overdue. We stay indifferent between resource and non-resource cyclicals relative to defensives.

 

 

[Uccmal]

Dec. 1 - tax loss selling?? 

 

Nice synopsis Cardboard. 

[alertmeipp]

This whole debacle looks to me like hedge funds piling on each other while many exit the trade.

 

While there are real factors explaining the oil price decline such as: QE end, USD strength since June, European and Chinese economic weakness, new strong production from the U.S. and the desire from Saudi Arabia to take down U.S. shale, the speed and depth of the decline just does not seem to add up with data from inventories.

 

When one looks at forward pricing for WTI, they are clearly in the $80 range despite current spot at around $65. So any company can hedge forward its future production at $80 if need be. It is only current, unhedged production that is delivered at $65 or below depending on the region. Is your company capable to survive oil at $65 for a quarter or two?

 

The picture looks even better for Canada, considering that you need to add about 13% to these prices accounting for the exchange rate.

 

So IMO, the people who are gonna suffer the most are the ones who are panicking now and dumping cheap equities. And the ones who are facing margin calls on equities and oil futures being forced to get out. Things are now priced like 2008/2009 with oil at $30 and there is no visible economic crisis. At least yet. If there is a global depression then all bets are off, but many stocks are pricing that already.

 

Cardboard

 

 

All 2015 CL futures trades below 70s. Forward pricing is useless forecaster.

 

[sampr01]

Interesting article on Oil. Worth reading it. :D

 

http://www.valueplays.net/2014/12/01/oil-oil-oil-2/